As well as traditional estate agents or developers selling in the United Kingdom, Auction House is one of the ways to buy and sell a property. Often smaller developers and individual investors in the UK are more keen on auctioning property, and there are often property auctions across the UK. During the pandemic has restricted offline home auctions, so online house auctions have sprung up virtually and attracted numerous investors.
Participating in a house auction requires the discernment to distinguish between the pros and cons. Some houses may seem cheap, but in fact they are layered with mines, and follow-up problems are continuous. However, looking at the positive side, there are also many buyers who can pick up a big bargain. At Chen Neill Solicitors, our experienced conveyancing solicitors suggest that if you want to buy a property through auction, you must do your homework in advance, including fully reading and studying the legal pack provided by the auctioneer, and be sure to conduct a site visit.
Recently, a client from Chen Neill Solicitors bid on a high-end property in London’s zone 1, although the price of the auction was relatively cheap, the lease of the house was less than 10 years. In the space of two years, the seller of the property is already the third resale of the property, and the first two sellers have applied for an extension of leasehold and it was unsuccessful. The client agreed to buy the property without fully understanding the legal documents and without a detailed understanding of the lease of the property before bidding. The client encountered problems and could not regret it. Because the law stipulates that once the property at auction is decided to be auctioned, the buyer must purchase the property (Legally Binding), and the entire transaction process must be completed within 28 days.
In order to avoid the loss of buyers who are interested in participating in the house auction and buy the auction house of their choice at the right price, our property solicitors have summarised the following suggestions:
1． Read the legal package carefully
Auctioneers will generally provide buyers with a package of legal documents for the property before the auction begins – including title deeds, environmental investigation reports from local authorities, lists of fixtures and fittings, seller information sheets, and any rental information related to the property. The legal documents provided by auctioneers are quite important, and it is recommended that you ask a solicitor to take a closer look, as there may be hidden contractual terms or loopholes that only professionals can find, and these loopholes may cause you to pay more than your budget.
2． Field trips
Generally speaking, you can make an appointment to visit your property about a month before the auction starts. You can bring an experienced architect with you on your expedition to help you see some issues that you may not notice from a professional point of view. At the same time, if you have plans to renovate your house, the architect can also estimate the cost of a renovation. This way, you can take into account the cost of the renovation when bidding. You can also hire a chartered surveyor to measure and evaluate the property during the viewing, and some of the structural problems of the property itself cannot be viewed with the naked eye, and the appraisal report of the professional surveyor will play a great help when you measure the value of the property.
3． Funding provision
If you are prepared to buy in cash, it is recommended that you ask your conveyancer to check the source of funds in advance to ensure that the transaction is completed within 28 days of bidding. If you need to take out a mortgage to buy a property, you will need to discuss with your mortgage lender in advance to get the Mortgage in Principal. This way you know the maximum amount you can bid for at the auction. Please note that you only have 28 days (20 working days) to complete the transaction after the auction, and often the loan application takes more than 28 days, it is just as important to have the purchase funds ready in advance as the two factors mentioned earlier.
One final tip is to take out home insurance as once your offer has been accepted, you will be liable for any damage to the property until completion, it is advisable to take out an insurance policy to protect yourself in the event of any damage.
If you are interested in buying an auction property or need any legal advice on real estate, please contact our residential conveyancing team.